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Roger William Soderstedt, Jr., et al v. Cbiz Southern California

July 7, 2011


(Los Angeles County Super. Ct. No. BC418209) APPEAL from an order of the Superior Court of Los Angeles County. William F. Fahey, Judge. Affirmed.

The opinion of the court was delivered by: Acting P. J. Doi Todd

Plaintiffs and appellants Roger William Soderstedt, Jr., and Ruslan Daych appeal from an order denying class certification in the action they filed against their former employer, defendant and respondent CBIZ Southern California, LLC (CBIZ). As putative class representatives, they sought to certify a class of current and former employees assertedly misclassified by CBIZ as exempt from California's overtime laws. The trial court ruled that a class action was not superior in light of the evidence submitted, finding that appellants failed to establish a predominance of common questions of law or fact, numerosity or adequacy.

We affirm. Substantial evidence supported the trial court's ruling that appellants failed to meet their burden to establish the requirements necessary for class certification, and the trial court neither employed improper legal criteria nor made erroneous legal assumptions in reaching this conclusion.


The Complaint.

CBIZ is an accounting and financial services firm with offices in Los Angeles, Oxnard and Bakersfield. Accountants at CBIZ are required to hold an accounting degree and are each classified by one of the following positions: Lead Managing Director, Managing Director, Director, Senior Manager, Manager, Supervising Senior, Senior and Associate. The services CBIZ provides include tax, attest and litigation support. Appellant Soderstedt began work as an Associate at CBIZ's Oxnard office in September 2005, immediately following his graduation from college. He was promoted to Senior Associate in January 2007 and left CBIZ in June 2007 after he earned his certified public accountant (CPA) license. Appellant Daych began work as an Associate in CBIZ's Oxnard office in July 2006, also immediately following his graduation from college. He was not promoted to Senior Associate and his employment was terminated in August 2008. Associates at CBIZ were expected and encouraged to work long hours, including more than eight hours per day and 40 hours per week. CBIZ never informed appellants about any policy requiring them to take lunch or rest breaks.

Appellants filed a class action complaint against CBIZ in July 2009, alleging multiple Labor Code violations for CBIZ's failure to pay overtime, provide meal and rest periods, provide itemized employee wage statements and pay wages timely, and a violation of Business and Professions Code section 17200 on the basis of that conduct. They purported to represent at least 146 other similarly situated current and former CBIZ Associates and Senior Associates.

The Class Certification Motion.

Appellants' Evidence.

In February 2010, appellants moved for class certification. They defined the class they sought to certify as: "All persons employed by Defendant in California, from January 2005 until the time when class notice may be given, who: (1) assisted certified public accountants in the practice of public accountancy, as provided for in California Business and Professions Code sections 5051 and 5053, (2) worked as associates or senior associates in the assurance or tax lines of service, (3) were not licensed by the State of California as certified public accountants during some or all of this time period, and (4) were classified as exempt employees."

In support of the motion, they offered appellants' declarations which described appellants' job training and responsibilities, and indicated they would represent the interests of the class to the best of their ability. In addition, appellants submitted the declarations of two other proposed class members who discussed the review and supervision of their work. On reply, they offered deposition excerpts, copies of documents produced by CBIZ relating to its internal policies, excerpts of the American Institute of Certified Public Accountants (AICPA) Professional Standards and evidence of counsel's experience in litigating class actions. They also sought judicial notice of the briefs submitted in connection with the Ninth Circuit appeal in Campbell v. PricewaterhouseCoopers, LLP (E.D.Cal. 2008) 253 F.R.D. 586 (Campbell).

According to their declarations, appellants gained a general understanding of CBIZ's organization and employment practices from attending a national seminar shortly after they began their employment. They learned that CBIZ's two largest areas of service were assurance and tax, and that accountants who worked in those areas held classifications ranging from Director as the most senior to Associate as the least senior. Typically, an Associate was a recent college graduate with limited accounting experience who had not yet been licensed as a CPA. The position of Senior, or Senior Associate, was held by someone with more accounting experience than an Associate, but who typically did not have a CPA license. The positions of Manager and Director were generally reserved for those holding a CPA license.

Appellants averred that the primary duty of an Associate was to prepare tax returns, which was a task subject to a uniform standard procedure, carried out using standardized computer software. Associates were required to document all work and were expected to seek guidance from a more senior accountant if they were uncertain about any issue on the return. After the tax return was completed, a Senior Associate would review it and prepare review notes; the Associate would make any necessary corrections and return the corrected return to the Senior Associate for further review. Once corrected, a Manager or Director would then review the tax return.

During their tenure at CBIZ, appellants and one other declarant also assisted CPA's in the assurance line of business, which included the performance of audits, compilations and reviews, all designed to provide verification of the accuracy of clients' financial statements. Each audit, compilation or review was performed essentially the same way, supervised by a CPA who was responsible for leading an engagement team and directing the team through the use of a plan which would contain a checklist of the necessary procedures. As with tax return preparation, each Associate's work would be documented and reviewed by a Manager and/or Director. Associates and Senior Associates did not have discretion to deviate from the plan without the prior express approval of the CPA responsible for the assurance work.

CBIZ had adopted written policies concerning personnel management and engagement performance. Pertinent here, it was CBIZ's policy "that all compilation, review, audit, and attestation (including forecast and projection) engagements be properly planned, performed, supervised, reviewed, documented, and communicated in accordance with the requirements of professional standards, regulatory authorities, and the Firm." In connection with this policy, CBIZ issued guidelines for tax return review, which outlined three phases of review. As a public accounting firm, CBIZ was also required to comply with the AICPA Professional Standards.

CBIZ's Evidence.

CBIZ opposed the motion on the grounds that appellants had failed to demonstrate a predominance of common claims, the representatives' claims were typical of the class or a class action was superior. In support of its opposition, it submitted 38 declarations from current and former employees, including Associates, Senior Associates, Supervising Seniors, Managers, Senior Managers, Directors and a Managing Director from different departments in each of CBIZ's three offices. Attached to counsel's declaration, CBIZ also offered appellants' deposition excerpts and employment records, as well as a summary comparison of statements made by appellants and its declarants.

CBIZ sought judicial notice of an order in another matter, California Industrial Welfare Commission Order No. 4-2001, a February 1989 opinion letter from the California Department of Labor Standards Enforcement (DLSE) and various federal and state regulations. CBIZ also submitted evidentiary objections to the evidence appellants offered in support of the motion.

CBIZ's evidence focused on the differences among CBIZ's offices, type of work and levels of supervision. For example, Los Angeles office Managing Director Chris Krogh averred: "The responsibilities of individuals within each job title vary dramatically based on any number of factors, such as their experience level, the particular engagement, the client, the client's industry, the other accountants with whom they are working and their office." Krogh also described the three CBIZ offices. CBIZ's largest office in Los Angeles employed 55 accountants who worked in the attest, tax or litigation department, each of which had its own client base and client engagements. Though Associates were permitted to work in all three departments for the first one to two years of their employment, accountants above Associate level generally worked in a single department. Only the Los Angeles office performed audits for public companies, which are conducted according to different standards than other types of audits.

The Bakersfield office employed 43 accountants in either the tax, attest or litigation department. Associates generally worked in either the tax and attest departments, or the litigation department; accountants above that level were required to choose a single department. The Bakersfield office worked for a diverse client base, including non-profit entities, and was the only CBIZ office to perform work for government clients.

The Oxnard office where appellants had been employed had 21 accountants who were not segregated into departments. The nature of the attest and tax work in that office was driven by the three individual Directors who performed that work, and the majority of the work in that office was for clients in the construction industry. Only the Oxnard office employed a "buddy system" to train new Associates.

Multiple current and former Associates and Senior Associates averred that they used their accounting knowledge and professional judgment in the course of carrying out their job responsibilities, and that the level of discretion and judgment they used depended on their experience and the nature of the engagement. They explained how each assignment was different, requiring them to utilize their accounting knowledge and judgment, and how their level of supervision decreased and their level of responsibility increased with each further engagement. They described the varying specific tasks involved with each area of engagement, including financial statement review and compilation, tax return preparation, tax research, audits and consulting work. Associates gave specific examples of engagements in which they regularly interfaced directly with clients and answered questions that fell within the scope of their professional knowledge. Senior Associates and some Associates were charged with reviewing the work of other Associates. Both Associates and Senior Associates declared that they exercised discretion in setting their schedule and in managing their workload so as to prioritize tasks and meet various deadlines.

Managers and Directors averred that they assigned different types of work to Associates and Senior Associates based on myriad factors, such as the individual's knowledge and abilities, which included his or her professional judgment, experience and skill level; the nature of the client; and the complexity of the assignment. Directors described the different job responsibilities associated with each area of engagement, as well as the difference in responsibilities in each office for similar engagements. Because Associates and Senior Associates tended to perform at different levels, Managers and Directors would provide different levels of supervision and review depending on the level of guidance and feedback required. Similarly, the level of client contact permitted varied among individual Associates and Senior Associates on the basis of their ability and experience.

Denial of Class Certification.

At an April 27, 2010 hearing, the trial court denied the motion on the ground that the requisite elements for class certification were not present. More particularly, the trial court ruled that there was no competent evidence of numerosity; the representatives' declarations were insufficient to show adequacy of representation; while common issues existed, they did not predominate; and class treatment would not be superior.

This appeal ...

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